The Triple Bottom pattern is used in technical analysis as a predictor of a reverse position following a long downward trend. The Triple Bottom occurs when the price of the stock creates three distinct downward prongs, at around the same price level, before breaking out and reversing the trend.
If you can find a Double Top / Bottom, looking for a Triple Top / Bottom is straightforward.
A Triple Bottom has three swing lows at around the same price level, and a Triple Top has three swing highs at around the same price level.
You can also relate it to the Head & Shoulders chart pattern. Just that in this case, the middle pivot is equal to the other two pivots.
The Triple Bottom represents two failed attempts to push below the support established by the first swing low. Naturally, it hints at a trend reversal. A break-out above the resistance line confirms the reversal.
Similarly, the Triple Top shows two unsuccessful tries to continue an upwards trend and signifies a bearish reversal.
The trading method is akin to the Double Top / Bottom chart pattern.
For a Triple Bottom chart pattern, buy:
- On break-out above the resistance line; or
- On pullback to the resistance line (now acting as support) after the break-out.
However, drawing the resistance line of a Triple Bottom might be tricky, especially if the two swing highs are unequal.
In that case, you can draw the resistance line:
- With the higher swing high; or
- With the second swing high; or
- Somewhere in the middle of the two swing highs.
For a Triple Top chart pattern, sell:
- On break-out below the support line; or
- On pullback to the support line (now acting as resistance) after the break-out.
You can draw the support line of a Triple Top pattern:
- With the lower swing low; or
- With the second swing low; or
- Somewhere in the middle of the two swing lows.
Volume should increase when price breaks out of the resistance/support line. It should also decrease with each upswing in the case of a Triple Top. For a Triple Bottom, volume should decrease with each down swing.
For the target objective, measure the height of the pattern and project it from the break-out point.